Return Migration of Aruban Students Jonathan Upegui Return Migration of Aruban Students Abstract: This paper analyses the return migration intentions of Aruban Students by way of a logit analysis. Aruban students do not have much choice to further their education in Aruba and hence must move abroad. The question asked is whether these students return when they have completed their studies. The Aruban government has even announced a policy to attract Aruban students. Will this policy be successful? And if these students are not returning to Aruba, where are they migrating to? Or are they staying in the Netherlands? Keywords: Migration, Return migration, Students, Aruba, Policy Name: Jonathan Upegui ANR: 341456 Program: Masters Economics Supervisor: Prof. Dr. H.P. van Dalen Words: 17.854 Firstly, I would like to thank my supervisor, Prof. Dr. H.P. van Dalen, for all the advice and guidance that he gave me. I would also like to give thanks to the Arubahuis for aiding in the distribution of my survey. Last but not least, I am grateful for all the support given to me by my parents. Without them I would not be where I am today. Outline Chapter 1: Introduction 3 Chapter 2: Background 5 2.1: The Aruban labor market 5 2.2: Migration in Aruba 7 2.3: Education in Aruba 9 2.4: Debt discount policy 11 2.5: Taking stock 13 Chapter 3: Literature review 14 3.1: Forms of migration 14 3.2: Determinants of migration 15 3.3: Student migration 17 3.4: Analysis of migration 19 3.5: Taking stock 22 Chapter 4: Data and methodology 23 4.1: Data 23 4.2: A model for return migration of Aruban students 25 4.3: Model 1: Return migration to Aruba 25 4.4: Model 2: Emigration from the Netherlands 29 4.5: Policy experiment 30 4.6: Taking stock 31 Chapter 5: Analysis and results 32 5.1: Descriptive statistics 32 5.2: Results: Labor market effects 34 5.3: Results: Model 1: Return migration to Aruba 36 5.4: Results: Model 2: Emigration from the Netherlands 40 5.5: Results: Policy experiment 42 5.6: Taking stock 47 1 Chapter 6: Conclusion 48 Appendix 50 References 59 Other sources 60 2 1. Introduction Every year, hundreds of Aruban students go abroad to further their education. Whether they return to Aruba once they have completed their study is less clear. In October 2009, the current government of Aruba proposed a policy that will give a 30 percent debt discount on the Arubalening to every Aruban student who returns to Aruba within 3 years of completing their study. This policy has not yet been passed, rather it is in its initial stages and no final date has been set on when it will actually be implemented. However, students can already apply for this discount. One of the reasons behind this policy is that there is an apparent “brain drain” movement with regards to Aruban students. Meaning that, for some reason or other, Aruban students, who have completed their higher education abroad, are not returning to Aruba. In this paper I intend to study the determinants that affect the decision of Aruban students to return to Aruba once they have completed their studies. My research question is three fold: Firstly, are Aruban students returning to Aruba once they have completed their studies? Secondly, what are the determinants that affect Aruban students’ decision to migrate from the Netherlands back to Aruba? And thirdly, has the policy announcement affected students’ decision to return? To my knowledge, this is the first study of migration of Aruban students. Regarding the third research question, it is the anticipation of the policy change that interests me. As I have mentioned, students can already apply for this discount. In an interview1, the first student who applied for this discount was asked whether she intended to return, even before this policy announcement. Her answer was yes, but she was glad that now she would have to pay less money, which would not have occurred, had she stayed in the Netherlands. Thus, it is possible that this policy does not alter the decision of students, but only benefits those were already planning to return to the island. This brings a discussion forward, whether this policy is beneficial (the first research question will assess the amount that could possibly be influenced to return) and if not, what other policies could be implemented (the second research question could possible shed light to this) that does show some benefits. Next to these three questions, it is also of some interest where Aruban students 1 This interview was conducted by the RNW and can be found on their website. The link is found in the references page. 3 are migrating to if not to Aruba. This is why I will also examine how many students will emigrate from the Netherlands and to which countries are they most willing to migrate to. The structure of this paper is as follows. First, I will present some background information with regards to Aruba. This is to give the reader an impression of the situation on the island. I will elaborate on the labor market of Aruba, trends in migration and the education system of Aruba. Secondly, I will present a literature review on several theories of migration and a possible method of analyzing migration. Thirdly, I will present the models which I will use to analyze the research questions. These models will be created by using the theories which were presented in the literature review. Following that, I will give the results of the analysis. Finally, I will give my conclusion and some discussion. 4 2. Background In this chapter I will present several aspects that give insight on the situation in Aruba. I will provide some details on the Aruban labor market, present recent migration data and also data on the number of students that go abroad to further their studies and also the reasons as to why they go abroad in the first place. This information is important for the analysis of the research questions. 2.1 The Aruban labor market The main source of economic activity in Aruba for years now has been the tourism industry. In fact, it is estimated that approximately 27.900 jobs created during the 1960-2000 period are attributable to the expansion in the tourism industry. The increase of the labor force after 1960 has been much larger than the growth of the working age population which implies a significant increase in labor force participation (CBS, 2003: 21-22). According to the Chamber of Commerce and Industry of Aruba (2007), growth in jobs in recent years can be attributed to the change in scale of the economy and society which created demand in services both in the private sector and the public sector instead of the tourism industry. There was a job growth of 10.000 in the private sector in 2005 compared with 1996. In this same period hotel rooms, which is the main indicator of growth in tourism, did not change by a substantial amount (6.944 in 2005 compared with 6.641 in 1996). Table 1 presents some data on Aruba’s labor market. In Aruba, labor data are not gathered yearly but instead are gathered in different periods by way of a census or a Labor Force Study (LFS). It can be seen that employment rate in the last 17 years has been in the 60 to 70 percent ratio while unemployment has been floating around 5 and 8 percent. In 2007, of the 73.000 in the working age population, 51.000 were employed while only 3.000 were unemployed. The rest (19.000) were economically inactive. So before the financial crisis (this crisis started around 2007-2008), the situation in the labor market was stable and growing. The question is: what does the future hold in store? 5 Table 1: Labor market statistics of Aruba for the period 1991-2007 (absolute numbers) Census Census 1991 LFS 1994 LFS 1997 2000 LFS 2007 Total population 66,687 78,450 87,720 90,506 104,006 Working age (15-64yrs) population 45,563 55,236 61,366 62,637 73,287 Total employment 28,740 35,743 38,736 41,286 50,967 Total unemployment 1,866 2,492 3,144 3,098 3,089 Employment rate in percentage 63.3 64.8 63.1 66.4 69.5 Unemployment rate in percentage 6.1 6.5 7.5 7.0 5.7 Participation rate in percentage 67.4 69.3 68.2 71.3 73.8 Source: CBS (2010a), Statistical yearbook 2009 The Central Bank of Aruba (2010) conducts its own analysis on the developments in the labor market and their conclusion is that in the short run future developments in the labor market will remain sluggish. Unemployment will continue to rise (table 2, 2010#) and this will most likely be in the construction section. This is under the assumption that the oil refinery on Aruba stays idle. On the other hand, A new hotel, the Ritz Carlton, will be under construction which will attract new jobs and if the oil refinery is restarted again, unemployment for 2010 (table 2, 2010*) and for the future could fall2. Table 2: Unemployment rate in Aruba (2006-2010) in percentage estimated by the Central Bank of Aruba Year Unemployment rate 2006 9.3 2007 7.1 2008 6.9 2009 11.3 2010# 12.4 2010* 9.0 Source: Central Bank of Aruba (CBA) (2010), Report 2009: Economic and Financial developments #: Under the assumption that the oil refinery stays idle *: Under the assumption that the oil refinery restarts 2 Update: the oil refinery has indeed restarted and in the Central Bank’s recent Economic Forecast Monitor (2011) the unemployment rate for 2010 was estimated at 9.0 percent and the 2011 unemployment rate is forecasted at 7.9 percent.